Chile
3-Year Foreign Income Exemption

Chile is a long, narrow country on the western edge of South America, stretching 4,300 kilometres from the Atacama Desert in the north to Patagonia in the south. The capital, Santiago, is home to 7 million people and sits in a broad valley between the Andes and the coastal range, with the snow-capped peaks of the Andes visible on clear days. Chile is an OECD member — the first South American country to join — and has the strongest institutions, the most transparent government, and the most stable economy on the continent.

Chile's tax system includes a three-year exemption on foreign-source income for new tax residents. During the first three years of Chilean tax residency, income from foreign sources — dividends, interest, capital gains, rental income, and other passive income — is entirely exempt from Chilean income tax. This exemption can be extended by a further three years upon application, giving qualifying residents up to six years of foreign income exemption in total. This provision makes Chile one of the most attractive jurisdictions in the world for individuals with significant foreign-source income who are willing to make a genuine relocation.

After the exemption period (three years, or up to six with extension), Chile taxes residents on their worldwide income at progressive rates of up to 40%. However, the combination of the initial exemption, a well-developed DTA network, and a high quality of life makes Chile a compelling option for those seeking a stable, prosperous base in South America.

What to be aware of

Chile is not a permanently low-tax jurisdiction. After the three-year exemption, income tax rates are progressive and can reach 40%. Corporate tax is 27%. The three-year exemption is a genuine advantage, but it is time-limited. Chile is also a long way from Europe — Santiago is 13–14 hours from London, and the time zone difference (UTC-3 to -4) can make European business relationships challenging. Political risk has increased in recent years, with a new constitution process and left-leaning government introducing some uncertainty about the future tax environment.

Santiago is a city of surprising quality. The Andes are visible from the city centre on clear days — a wall of snow-capped peaks rising to over 6,000 metres, less than 50 kilometres to the east. The city has good restaurants, excellent wine, a functioning metro system, and neighbourhoods — particularly Providencia, Las Condes, and Vitacura — that would not be out of place in a prosperous European city. The air quality can be poor in winter due to thermal inversion, but the overall quality of life is high by South American standards.

Chile's geography is extraordinary. The Atacama Desert in the north is the driest place on earth — a landscape of salt flats, geysers, and volcanoes that looks like another planet. The Lake District in the south, around Pucón and Puerto Varas, is a region of volcanic lakes, forests, and hot springs that rivals Switzerland for natural beauty. Patagonia — shared with Argentina — is one of the last great wilderness areas on earth. The wine country of the Maipo, Casablanca, and Colchagua valleys produces wines that compete with the best in the world.

Miami is 8 hours by direct flight. New York is 11 hours. London is 14 hours. Chile is genuinely far from Europe, and this is a real consideration for those with European business or family connections. However, for those oriented toward North America or the Pacific, the distance is more manageable.

"I grew up in this town, my poetry was born between the hill and the river, it took its voice from the rain, and like the timber, it steeped itself in the forests."

"He who does not know the Chilean forests, does not know the planet."

"In Patagonia, the isolation makes it easy to exaggerate the person you are: the drinker drinks; the devout prays; the lonely grows lonelier, sometimes fatally."

Chile's primary tax advantage is the three-year exemption on foreign-source income for new tax residents. This is a genuine, statutory provision of Chilean tax law — not a special regime requiring application or approval, but the standard treatment for all new residents during their first three years of Chilean tax residency.

• ›Three-year foreign income exemption — all income from foreign sources (dividends, interest, capital gains, rental income, royalties) is exempt from Chilean income tax for the first three years of residence.
• ›Zero capital gains tax on shares — gains on the sale of publicly traded shares are exempt from tax for the first three years. After three years, gains are taxed at 10%.
• ›OECD membership — Chile is an OECD member, providing institutional credibility and a well-developed legal framework.
• ›Extensive DTA network — Chile has double tax agreements with over 40 countries, including Germany, the UK, France, Spain, Australia, Canada, and the US.
• ›Political stability — the strongest institutions and most stable democracy in South America, with a long history of rule of law and property rights protection.
• ›Quality of life — Santiago offers a European-quality urban lifestyle at a fraction of European costs, with extraordinary natural environments within reach.

Under Chilean law, an individual becomes a tax resident if they have their domicile in Chile or have been physically present in Chile for more than 183 days in any 12-month period. Domicile is defined as the combination of residence and the intention to remain — it is a qualitative test that looks at where you have genuinely established your life.

Once you are a Chilean tax resident, the three-year exemption on foreign-source income begins automatically. You do not need to apply for it or register for a special regime — it is the standard treatment for all new residents. The exemption covers all income from foreign sources, including dividends, interest, capital gains, rental income, and royalties.

Chile has an extensive network of double tax agreements (DTAs) with over 40 countries, including Germany, the United Kingdom, France, Spain, Australia, Canada, the United States, Brazil, and most of Latin America. This network is particularly valuable after the three-year exemption period, when Chilean residents become taxable on their worldwide income — the DTAs allow them to receive foreign income with reduced withholding at source.

During the three-year exemption period, the DTAs are less relevant for foreign-source income (since it is exempt anyway), but they remain important for income from Chilean sources and for managing the transition to full Chilean taxation after year three.

Key DTAs include agreements with Germany (5%/15% dividend withholding), the United Kingdom (5%/15%), France (5%/15%), and the United States (15%). The specific rates depend on the type of income and the shareholding percentage.

Relocating to Chile does not automatically end your tax obligations elsewhere. The critical question is whether you have genuinely severed tax residency in your country of origin — and this is determined not by where you have registered an address, but by where you actually live, where your ties are, and how your life is organised.

Most countries use a combination of objective tests to determine tax residency: the number of days you spend on their territory, where your family lives, where your habitual abode is, where your business is managed, and where your social and economic life is centred. If you spend more than 183 days in your home country, maintain a family home there, or continue to manage a business from there, you may remain fully tax resident — regardless of what your Chilean residence permit says.

A sham relocation — registering an address in Chile while continuing to live, work, and maintain your life elsewhere — does not achieve tax freedom. It creates legal risk. We only work with clients who are serious about making a real move to Chile.

Before you relocate to Chile, you need to understand what tax consequences arise in your current country of residence at the point of departure. These rules vary significantly by country and must be assessed individually.

• ›Germany — Applies an exit tax on unrealised gains in shareholdings of 1% or more under §6 AStG. A ten-year look-back period can apply even after departure.
• ›United States — The expatriation tax under IRC §877A treats long-term residents and citizens as having sold all worldwide assets at fair market value on the day they relinquish citizenship or residency.
• ›France — Exit tax applies to unrealised gains on securities and company rights above €800,000 when a French tax resident relocates abroad.
• ›United Kingdom — Temporary non-residence rules: if you leave the UK and return within 5 years, certain income and gains realised during the absence are taxed on return.
• ›Spain — Exit tax applies to unrealised gains on shares and other assets when a Spanish tax resident relocates abroad.

Chile's corporate income tax rate is 27% — higher than many other tax-efficient jurisdictions, but offset by the three-year exemption on foreign-source income and the DTA network. The main corporate structures available are:

• ›SpA (Sociedad por Acciones) — the most flexible and commonly used structure for foreign investors. Can be formed by a single shareholder, with no minimum capital requirement. Corporate tax at 27%.
• ›SRL (Sociedad de Responsabilidad Limitada) — the Chilean equivalent of a limited liability company. Requires at least two partners. Corporate tax at 27%.
• ›SA (Sociedad Anónima) — a joint stock company, used for larger businesses and those seeking external investment. More complex governance requirements.
• ›Branch of a foreign company — a foreign company can operate in Chile through a branch, which is taxed at 35% on remitted profits.

Chile has a partially integrated tax system — corporate tax paid at the company level can be credited against the personal income tax (or final withholding tax) due on dividends. The effective combined rate on profits distributed as dividends to a non-resident is 35%.

Chile works well for a specific profile of person. It does not work for everyone.

Good fit for:

• ›High-net-worth individuals with significant foreign-source income — the three-year exemption is most valuable for those with large dividend, interest, or capital gains income from foreign sources.
• ›Those planning a major asset sale or liquidity event — establishing Chilean residency before a large capital gain can result in zero Chilean tax on the gain during the three-year exemption period.
• ›Those oriented toward Latin America — Chile is the natural base for anyone with business or investment interests in South America.
• ›Those who value political stability — Chile has the strongest institutions in South America and a long history of rule of law.

Poor fit for:

• ›Those seeking long-term low taxation — after three years, Chile's progressive rates (up to 40%) apply. For permanent low taxation, other jurisdictions are more appropriate.
• ›Those with strong European ties — the distance from Europe (13–14 hours) makes maintaining European business relationships challenging.
• ›Those who cannot genuinely relocate — Chile requires real presence and real ties to work as a tax base.

Most Western nationals can enter Chile visa-free for up to 90 days. For longer-term residence, the main options are:

• ›Temporary Residence Visa (Rentista) — for those with sufficient passive income (dividends, pensions, rental income) to support themselves in Chile. Requires proof of regular income. Valid for one year, renewable.
• ›Investor Visa — for those making a qualifying investment in Chile. Requires a formal investment contract with the Chilean government.
• ›Digital Nomad Visa — for remote workers employed by companies outside Chile. Valid for one year, renewable once.
• ›Permanent Residence — available after two years of continuous temporary residence in Chile.

Chilean citizenship can be obtained by naturalisation after five years of continuous legal residence in Chile, provided the applicant has no criminal record, demonstrates language proficiency, and can show genuine ties to Chile. Chile permits dual citizenship, so you do not need to renounce your existing nationality.

Chilean citizenship provides a strong passport — visa-free or visa-on-arrival access to over 170 countries, including the EU Schengen Area, the United Kingdom, Japan, and South Korea. For those from countries with weaker passports, Chilean citizenship can be a valuable addition.

The naturalisation process involves submitting an application to the Chilean Ministry of Foreign Affairs, demonstrating the required period of residence, and passing an interview. The process typically takes 12–24 months from application to approval.

Chile has the most sophisticated banking system in South America. The sector is well-regulated by the Comisión para el Mercado Financiero (CMF) and the Banco Central de Chile. Major banks include Banco Santander Chile, Banco de Chile, BancoEstado, Banco BCI, and Itaú Chile. Opening a personal bank account as a Chilean resident is straightforward, though it requires a Chilean RUT (tax identification number).

Chile participates in the OECD Common Reporting Standard (CRS), and Chilean financial institutions are required to report account information for foreign tax residents to the relevant authorities. This is not a problem for genuine Chilean residents — it is a problem only for those who are using a Chilean address while actually residing elsewhere.

The Chilean peso (CLP) is a freely floating currency. For those with income in USD or EUR, currency exchange is straightforward, and USD accounts are available at most major banks.

Beyond the tax advantages, Chile has a number of qualities that make it a genuinely attractive place to live.

• ›Natural diversity: Atacama Desert, Andes mountains, Patagonia, wine country, Pacific coast — Chile has more natural variety than almost any other country on earth.
• ›Wine: Chilean wine is world-class and extraordinarily affordable. The Maipo, Casablanca, and Colchagua valleys produce wines that compete with Bordeaux and Napa at a fraction of the price.
• ›Political stability: The strongest institutions and most stable democracy in South America. Rule of law, property rights, and contract enforcement are reliable.
• ›Quality of life in Santiago: Good restaurants, good healthcare, good schools, and a cosmopolitan urban environment at a fraction of European costs.
• ›Skiing: The Andes provide world-class skiing within 90 minutes of Santiago, with resorts like Valle Nevado and Portillo offering excellent conditions from June to September.
• ›Safety: Chile is one of the safest countries in South America, with a lower crime rate than most of its neighbours.

Chile is significantly cheaper than Western Europe or North America, though it is the most expensive country in South America. Santiago's upscale neighbourhoods (Providencia, Las Condes, Vitacura) offer a European-quality lifestyle at approximately 40–50% of the cost of equivalent living in London or Paris.

• ›Rent (Santiago, Las Condes, 2-bed apartment): US$1,200–$2,500/month
• ›Groceries: Approximately 30–40% cheaper than Western European prices
• ›Dining out: US$15–$50 per person at a mid-range restaurant
• ›Healthcare: Private health insurance is recommended; costs are low by Western standards. The private clinic system in Santiago is of high quality.
• ›Comfortable lifestyle (couple, Santiago): US$4,000–$7,000/month, excluding property costs

Foreign nationals can purchase real estate in Chile without restriction. The process follows Chilean civil law, and title is registered with the Conservador de Bienes Raíces. Legal due diligence, title searches, and notarisation are standard and recommended.

• ›Apartments (Santiago, Las Condes, 2-bed): US$200,000–$500,000
• ›Houses (Santiago, upscale areas): US$400,000–$1,500,000+
• ›Transfer tax: 0% (no transfer tax on residential real estate in Chile)
• ›Notary and registration fees: Approximately 1–2% of the purchase price
• ›Annual property tax (Contribuciones): Approximately 1–1.5% of the assessed value

Chile has no transfer tax on residential real estate, which is a significant advantage compared to many other jurisdictions. The property market in Santiago has been appreciating steadily, and rental yields in upscale areas are typically 4–6% gross.

Chile is an increasingly popular retirement destination for North Americans and Europeans. The combination of the three-year foreign income exemption, a warm climate (in the central and northern regions), good healthcare, and a high quality of life makes it genuinely attractive for retirees with sufficient assets.

• ›Pension income: Exempt from Chilean tax during the three-year exemption period. After three years, taxed at progressive rates. Source-country withholding may also apply depending on the applicable DTA.
• ›Healthcare: Private health insurance is recommended. The private clinic system in Santiago is of high quality and significantly cheaper than in North America or Western Europe.
• ›Residence permit: Retirees typically apply for the Rentista visa, which requires proof of sufficient passive income.
• ›Cost of living: Moderate. A comfortable retirement lifestyle in Santiago costs US$3,500–$6,000/month for a couple.

The United States taxes its citizens on worldwide income regardless of where they live. Moving to Chile does not end your US tax filing obligation.

The United States and Chile have a bilateral income tax treaty (the US–Chile DTA), which provides relief on certain categories of income including dividends, interest, and royalties. However, the treaty does not eliminate US worldwide taxation for US citizens. During Chile's three-year foreign income exemption period — which can be extended by a further three years upon application, giving up to six years total — foreign-source income is not taxed in Chile, which limits the Foreign Tax Credit available to offset US liability. You should confirm your specific treaty position with a qualified US international tax adviser.

The Foreign Earned Income Exclusion (FEIE)

The more reliable tool for most Americans living in Chile is the the Foreign Earned Income Exclusion (FEIE) under IRC Section 911. For tax year 2025, the exclusion allows you to exclude up to $130,000 of foreign earned income from US federal income tax. For tax year 2026, the limit rises to $132,900 per qualifying person, adjusted annually for inflation.

• ›Earned income only: The FEIE applies to wages, salaries, and self-employment income earned while your tax home is abroad. It does not cover passive income — dividends, interest, capital gains, pensions, or rental income remain taxable by the US (though you may claim a Foreign Tax Credit for any taxes paid locally).
• ›Qualification tests: You must meet either the Bona Fide Residence Test (being a bona fide resident of a foreign country for an uninterrupted period covering an entire tax year) or the Physical Presence Test (being physically present in a foreign country for at least 330 full days in any 12-month period).
• ›Self-employment tax still applies: The FEIE reduces income tax but does not eliminate US self-employment tax (15.3%) on net self-employment income. This is a significant cost for freelancers and sole traders.
• ›FBAR and FATCA reporting: Americans with foreign bank accounts exceeding $10,000 must file an FBAR annually. FATCA reporting thresholds apply to foreign financial assets. Chilean banks participate in CRS, and account information is exchanged internationally.

If you live in Chile and are a genuine tax resident there, the OECD Common Reporting Standard (CRS) presents no problem. You are legally entitled to hold accounts abroad and receive foreign income — during the three-year exemption period, that income is not taxable in Chile anyway. Your status as a Chilean resident will be known to your banks, and any information exchanged under CRS will simply confirm what you have already declared.

The CRS is a threat only to those who are not genuine residents of Chile but are using a Chilean address to conceal income from their actual country of residence. For legitimate residents of Chile, CRS is irrelevant — you are not evading taxes, you are simply living in a country that grants a three-year exemption on foreign income.

Beyond the tax and immigration steps, relocating to Chile involves a number of practical formalities. These include deregistering from your home country's residents' register, notifying your home country's tax authority of your departure, closing or restructuring any business interests that could create continued tax nexus, and ensuring your financial accounts are correctly documented with your new Chilean address.

In Chile, you will need to: obtain your residence visa and permit, obtain a Chilean RUT (tax identification number), open a Chilean bank account, and register your address with the relevant authorities. If incorporating a company, you will need to complete the registration with the Chilean Commercial Registry. We assist with coordinating all of these steps as part of our relocation service.

A move to Chile is not complicated — but it requires proper planning. The three-year exemption is a genuine advantage, but it only materialises if the relocation is executed correctly and the clock starts at the right time. We work with clients at every stage of the process, from the initial feasibility assessment through to the final deregistration from their home country.

• ›Tax advice on the consequences of relocating to Chile: analysis, projections, assessments
• ›Clarifying location questions for your business in Chile based on factors such as market access, available workforce, and public subsidies — in collaboration with local experts
• ›Recommendations for local estate agents experienced with international clients, for both rental and purchase in Chile
• ›Referrals to specialist immigration lawyers for Chilean residency and permit matters
• ›Introductions to local tax advisers who handle the opening of bank accounts for both the company and you personally in Chile
• ›Ongoing tax and administrative management of your Chilean company
• ›Tax-efficient structuring and restructuring of assets via foreign companies, holding structures, and trusts